Rapport Africa-Insight HD Com

February 2024
AfCFTA, harnessing the power of Intra-Africa trade
CFC Africa Insights

AfCFTA, harnessing the power
of Intra-Africa trade
CFC Africa Insights
TABLE OF CONTENTS
1 Foreword 4
2 Executive Summary 6
3 Keys Infographics 7
4 Introduction 9
5 Chapter One : AfCFTA Context 10
6 Chapter Two : Macroeconomic Impacts 19
7 Chapter Three : International Comparisons 27
7.1 Chapter Four : Sector Case Studies 36
7.2 4.1. Automotive Sector (Morocco) 37
7.3 4.2. Agro-processing (Côte d’Ivoire) 43
7.4 4.3. Clothing and Apparel (East Africa) 50
8 4.4. Energy Transition (Various Economies) 57
9 Conclusion & Takeaways 64
10 Glossary 65
Sources Cited 66
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FOREWORD
As we stand on the cusp of a new era in Africa’s economic integration, it is with great pleasure
that I introduce this new edition of our CFC Africa Insights Series dedicated to the African
Continental Free Trade Area (AfCFTA). The AfCFTA represents a monumental milestone in the
journey towards realising Africa’s full economic potential, fostering intra-African trade and
investment, and driving sustainable development across the continent.
In recent years, Africa has demonstrated remarkable resilience and determination in overcoming
various challenges on its path to economic prosperity. The establishment of the AfCFTA signifies
a collective commitment among African nations to harness the continent’s vast resources and
promote value creation, while leveraging opportunities for shared growth and development.
This report serves as a comprehensive examination of the opportunities and challenges

presented by the AfCFTA, offering insights and analysis to empower businesses, policymakers,
and stakeholders to navigate this transformative landscape effectively. From exploring the
potential impact on key sectors (as automotive, agro-processing, clothing & textiles, or energy
transition) to contemplating international aspirational benchmarks (such the EU or the ASEAN) or
the current investment landscape, the report provides valuable perspectives to inform strategic
decision-making and foster collaboration across borders.
The AfCFTA holds immense promise to unleash Africa’s economic potential and elevate its
position on the global stage. By removing barriers to trade, harmonising regulations, and fostering
a business-friendly environment, the AfCFTA paves the way for increased competitiveness,
innovation, and inclusive growth. Furthermore, it represents a testament to Africa’s unity and
determination to chart its own course towards emergence, building on its rich diversity and
complementarity as an intrinsec source of strength and resilience.
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CFC Africa Insights
As we embark on this transformative journey, it is crucial to recognize that realising the full
benefits of the AfCFTA will require concerted efforts from all stakeholders. Governments must
prioritise policy reforms that streamline trade and investment, while businesses must be agile
and adapt to new market dynamics, seizing opportunities for collaboration and expansion.
I have the strong conviction that business and financial centers as well
as their respective ecosystems, have a vital role to play in promoting
awareness, building capacity, and putting in place frameworks to
ensure the broad and holistic success of this ambitious initiative.
On a final note, I extend my sincere appreciation to all those who have contributed to the
development of this report, as well as to the visionary leaders and institutions driving forward
the AfCFTA agenda. Together, let us seize this historic opportunity to build a more prosperous,
interconnected, and resilient Africa for generations to come.
I wish you a pleasant read.
Said Ibrahimi
CEO - Casablanca Finance City Authority
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Executive
Summary
• The African Continental Free Trade Area • While AfCFTA will eventually boost investment
(AfCFTA) is an ambitious effort to boost and the cross-border trade in services, this
growth and improve social outcomes through report has focused on the more-immediate
increased economic integration. impact on merchandise trade. It includes four
key case studies:
• The AfCFTA is still a work in progress. Many
operational details – including the dispute- - Morocco’s automotive sector stands to
settlement mechanism – have yet to be benefit from Africa both as a key source
agreed. Based on the current schedule, tariff of demand and as a zone of production.
liberalisation will not be complete until 2033. Integrating West African economies into its
supply chains can cut costs and create jobs
• Even when complete, AfCFTA will create a across the region.
loose, state-driven trade regime rather than
a homogenous single market like the EU. - Côte d’Ivoire’s agro-processing sector
Individual RECs will remain key actors. Investors is well positioned to supply processed and
and exporters will still need to consider national packaged food. With the right investment,
and sub-regional policy. the country could also process more of its
cocoa crop domestically.
• AfCFTA will boost African economies through
three main channels: lower prices and more - Reduced intra-Africa tariffs will help East
consumer choice, new cross-border value Africa’s clothing sector to compete against
chains and economic diversification, and a Asian rivals in serving Africa’s growing
reduced dependence on foreign markets. demand. The region has abundant natural
resources and a large labour force. Ethiopia
• In aggregate, studies suggest that the deal has already begun to move up the value
could raise real incomes by 7% by 2035. The chain.
impact will be largest in smaller economies and
those that currently have high trade barriers. - AfCFTA will accelerate Africa’s energy
Much depends, however, on how the deal is transition. Integrating power networks will
eventually implemented. create cheaper, more-reliable grids and
lower tariffs will encourage the domestic
• The experience of Asian economies may production of manufactured products like
provide a guide to how AfCFTA will evolve. solar panels. South Africa and Morocco
Africa is not following Europe’s institution- stand out as having the most potential.
led, legally homogenous mode of regional
organisation. The deal has more in common • In each case, growth in one country will create
with the ASEAN-led system than the EU. positive spill-overs elsewhere. Modernising
agriculture, for example, will boost demand
• AfCFTA will encourage the creation of regional for inputs like fertiliser and tractors that are
hubs that help to meet African demand. Africa’s produced in Morocco and South Africa.
more-advanced economies, like Morocco, will
benefit both by exporting to new markets and by
the ability to source cheaper imports.
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CFC Africa Insights
Key
Infographics
Additional Increase in Real Incomes by 2035,
% change compared to non-AfCFTA baseline
Source: World Bank (Change by 2035)
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AfCFTA Benefits
Increase in Intra-Africa Trade by 2035, USDbn
Source: World Bank (Rise in exports compared to non-AfCFTA baseline)
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CFC Africa Insights
INTRODUCTION
At a time when politicians in many parts of the world are turning
inward, the African Continental Free Trade Area (AfCFTA) is an
exciting example of countries working together to reap the benefits
of economic integration. The following report provides an analysis
of this process and lays out some of the benefits for investors and
exporters as Africa completes one of the world’s largest trade
agreements.
The deal is, admittedly, still a work in progress. Indeed, while

AfCFTA will eventually create significant opportunities for Moroccan
firms in the financial, travel and communications sectors, this
report is primarily focused on the impact on goods trade because
negotiations on this area have made more progress. While the
Guided Trade Initiative (GTI) is already giving a preview of how the John Ashbourne
Senior Emerging Market Economist
system may work in practice, much will depend on how the AfCFTA BMI, a Fitch Solutions Company
is eventually implemented. In Chapter Three, we show how the final
shape of AfCFTA will resemble the inter-governmental model seen
in Asia more than the institution-led model that has developed in
Europe.
It is, however, already clear that AfCFTA offers a significant opportunity for firms across the continent.
As this report shows, the AfCFTA process will improve consumer choice, bring down trade costs and
facilitate the creation of cross-border value chains. We are particularly optimistic about the potential
of the manufacturing sector, which will benefit from increased economies of scale that will lower
production costs and encourage investment. In one of this report’s four detailed case studies, we
highlight how Morocco’s automotive sector will benefit from both new export markets and from the
ability to source low-cost components from African producers.
We think that Morocco is particularly well placed to harness the potential of intra-Africa trade. As one
of the continent’s most advanced economies, Morocco is home to firms in the automotive, fertiliser,
financial services, consumer goods and transport sectors that will be able to find new markets across
the continent.
We stress, however, that the benefits of AfCFTA will be widely shared and will create growth across
the whole continent. By creating cross-border value chains, African economies will benefit from their
neighbours’ successes. For example, bringing down agricultural tariffs in West Africa will boost Ivorian
exports and bring down prices for Nigerian consumers. But it will also create new markets for South
African tractor manufacturers and Moroccan fertiliser exporters.
Reaching this potential will require continued efforts by policy-makers to push forward with
negotiations and agree the details of how the deal will be implemented. Indeed, as we show in Chapter
Two, realising the benefits of the deal will also require reducing non-tariff barriers, pushing forward
with trade facilitation agreements, and improving physical infrastructure.
Investors and firms that want to benefit from AfCFTA will have to work hard to keep abreast of a
complex and quickly changing landscape. We hope that this report provides a helpful guide to this
fast-moving process and prompts a valuable discussion in Morocco and elsewhere.
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CHAPTER 1
Context of the African
Continental Free Trade Area
(AfCFTA)
CFC Africa Insights
AfCFTA is an ambitious, continent-wide effort to integrate African economies. It aims to encourage faster
economic growth, greater economic diversification and better social outcomes for the people of Africa.
The deal, which was signed by 44 heads of state on 21 March 2018 and came into effect following the 22nd
ratification on 30 May 2019, is a significant diplomatic achievement. Indeed, measured by either population or
number of parties, the market created by AfCFTA is one of the largest in the world (see Selected Free Trade
Areas chart). When all 54 state parties eventually ratify AfCFTA, it will encompass a third of all members of
the World Trade Organization (WTO).
Selected Free Trade Areas
State Parties Population GDP (trillion)

AfCFTA 46* 1.3 billion USD 3.5
Association of South East Asian Nations (ASEAN) 10 668 million USD 10.2
Comprehensive & Progressive Agreement for Trans-Pacific Partnership 11 513 million USD 13.5
European Union (EU) 27 447 million USD 17.8
Gulf Co-operation Council (GCC) 6 65 million USD 2.3
Regional Comprehensive Economic Partnership (RCEP) 15 2.2 billion USD 29.7
United States-Mexico-Canada Agreement 3 500 million USD 26
Source: BMI Research (*Not all have ratified)
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1. THE STATE OF ECONOMIC INTEGRATION IN AFRICA
Most African economies are much less integrated with their neighbours than peers on other continents. In
2022, just 15% of African exports were sent to other African economies. The comparable figure in Asia was
57% (see Fig 1.1).
Figure 1.1 Exports to Own Continent, % of total exports
Source: Trade Map (2022)
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CFC Africa Insights
The paucity of intra-African trade is the result of a variety of factors – some of which can be addressed by
a trade deal. For one thing, many African states only export a few raw goods that their neighbours do not
need (for example, crude oil) and import a wide variety of manufactured products that their neighbours do
not produce (for example, electrical equipment). Even when African countries do produce goods for which
there is demand within the continent, the poor quality of infrastructure often makes it cheaper to import a
product by sea from China than by road from a neighbouring state. Fully implementing AfCFTA will require
investments in infrastructure. The Initiative to Enhance Atlantic Ocean Access for Sahel Countries, launched
by His Majesty King Mohamed VI of Morocco, may provide a model. The scheme, which aims to link inland
Sahelian countries to the Atlantic Ocean, has spurred significant international media attention.
But while tariffs are not the only factor holding back African trade, they clearly play an important role. They
are also the obstacles that are easiest and cheapest to remove. Tariff levels vary across Africa, but they are
high in most economies. Also, and unlike in other regions, most African goods face higher tariffs entering
neighbouring markets than they face elsewhere in the world (see Fig 1.2).
Figure 1.2 Trade-Weighted Tariff Faced

by sub-Saharan African Exporters, %
Source: World Bank
Creating a more-integrated African economy will provide a huge potential for firms across the continent.
While Africa currently makes up about 2.7% of global economic output, the region is set for rapid growth over
the coming decades. BMI estimates that Africa’s GDP will rise to over USD7.0 trillion by 2050 (see Fig 1.3). By
this time, the continent’s GDP will exceed that of Japan.
Figure 1.3 Africa GDP, USDbn
Source: BMI Forecast
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2. THE AFRICAN CONTINENTAL FREE TRADE AREA PROCESS
While some policy-makers have been calling for an Africa-wide trade agreement since the 1960s, the
negotiating process that led to the AfCFTA agreement began with the 1991 Abuja agreement, which
established an “African Economic Community”. The treaty agreed on the goal of closer economic integration
and began a process of using the existing Regional Economic Communities (RECs) to build an Africa-wide
trade bloc. This process culminated in the agreement founding an African Continental Free Trade Area,
which was signed in Kigali in 2018 (see timeline). The process has been led by national governments with
support from the African Union (AU) and many of the continent’s development finance institutions.
Navigating a Turbulent Context: AfCFTA and Geopolitics

• The operationalisation of AfCFTA is happening at a time of elevated political risk across the
continent. This year will see almost two dozen elections in Africa, including in key economies
such as South Africa, Ghana, Algeria and Tunisia. These votes create the risk that policy-makers
may attempt to delay negotiations, or to reopen discussions that have been closed.
• The continent’s existing institutional architecture is increasingly coming under strain. The
decision by the authorities in Burkina Faso, Mali, and Niger to leave the Economic Community
of West African States (ECOWAS) has complicated the implementation of AfCFTA, which relies
on cooperation between the existing regional blocs.
• African integration is also taking place against a backdrop of increased competition between
the world’s major economies. Policy-makers across the continent are facing the challenge of
managing relations with Europe, Russia, China and the United States. Cooperation under the
umbrella of AfCFTA may eventually help to amplify African voices on the global stage.
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CFC Africa Insights
AfCFTA will take effect in phases. The first phase established the AfCFTA institutions and began the process
of liberalising trade in goods and services. While this report primarily focuses on trade – because negotiations
on this issue have made more progress – potential in services is also significant. The AfCFTA service
negotiations have focused on five priority areas (1) financial services; (2) transport; (3) telecom/information
technology; (4) professional services; and (5) tourism. The first of these probably offers the most potential
for Moroccan firms. Morocco has a well-developed financial services sector, and the removal of non-trade
barriers will allow local firms to increase their operations into sub-Saharan Africa, where only about half of
the population have access to financial services. Meeting the unmet financial needs of African individuals and
firms will both provide a source of revenue for Moroccan banks and help to remove a key obstacle to growth
across the continent (see Fig 1.4).
Figure 1.4 Firms Reporting Access to Finance

as their Greatest Obstacle, % of total
Source: IMF Financial Access Survey
The integration of financial markets on the continent may also create the conditions for capital market
deepening or the creation of regional stock and bond markets. This already exists within West Africa’s Union
Économique et Monétaire Ouest Africaine (UEMOA), but elsewhere in Africa most equity and capital markets
are run along strictly national lines.
In 2023, the AU assembly of heads of state adopted three new protocols – covering investment, intellectual
property rights and competition policy. While these protocols are narrowly defined (the investment protocol
excludes portfolio investment or sovereign bonds) they aim to ensure that investors from other AfCFTA
states receive the same treatment as locals. This is an effort to de-risk intra-Africa investment, which will
encourage African firms to expand their operations across the continent and facilitate the creation of cross-
border value chains.
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While the broad strokes of phase one have been agreed, it will take time to come into effect. The agreement
gives all its members at least five years to remove tariffs on 90% of their tariff lines, and ten years to remove
tariffs on those tariff lines deemed “sensitive”. (The remaining 3% of tariff lines, which cover 10% of imports
by value, will be retained in perpetuity.) AfCFTA’s 33 Least Developed Countries (LDCs) are given longer to
implement these changes, meaning that the changes to intra-African goods trade will take until 2034 to be
fully implemented (see Tariff Removal Schedule table). The liberalisation of trade in services will also come
in stages.
AfCFTA – Tariff Removal Schedule
Coverage Schedule
Tariff Line (%) Value of Imports (%) Non-LDCs LDCs
General Goods 90 2020-25 2020-2030

90
Sensitive Goods 7 2025-2033 2025-2033
Excluded Goods 3 10 No Liberalisation No Liberalisation
Source: World Bank, UNCTAD, BMI Research
Some aspects of the AfCFTA system have yet to be finalised. For example, an agreement was signed in 2022
to establish an Adjustment Fund to help the public and private sectors to manage any short-term costs, but
the institution – which is based in Rwanda – has not yet been fully operationalised. Similarly, the dispute-
settlement mechanism is still a work in progress.
Guided Trade Initiative: A Preview of AfCFTA Trade?

• While trading under AfCFTA rules was officially launched on 1 January 2021, the lack of final
decisions on many practical issues has prevented commercial meaningful trade.
• The Guided Trade Initiative (GTI), launched on 7 October 2022, is an effort to kick-start the
process by facilitating trade under AfCFTA rules for a set list of products among eight state
parties (Cameroon, Egypt, Ghana, Kenya, Mauritius, Rwanda, Tanzania and Tunisia).
• The volume of goods traded is still very small, but this initiative will help firms to familiarise
themselves with the paperwork and regulations that will eventually cover most intra-Africa
trade.
• The GTI will also provide a valuable test of operational systems and help policy-makers
to better manage the implementation of Africa-wide rules when they eventually become
operational.
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CFC Africa Insights
3. KEY AFRICAN CONTINENTAL FREE TRADE AREA INSTITUTIONS
The AfCFTA process has been driven by national

governments and does not foresee the creation
of strong supranational bodies like those in
Europe. The highest decision-making body of
AfCFTA will be the AU’s assembly of heads of
state and government, which will decide issues by
consensus. The assembly also has a legal function,
in that it is the only body empowered to decide on
questions of the interpretation of the AfCFTA. While
it is possible that AfCFTA will gradually evolve into
a more-formal, institution-led system like that
in Europe, this is difficult to foresee at this time.
(For a comparison of different models of economic
integration, see Chapter Three.)
On a day-to-day basis, AfCFTA will be managed

by a secretariat, which opened its headquarters
in Accra, Ghana, in August 2020. The secretariat
is an administrative body that will communicate
with state parties, coordinate meetings and hold
discussions with third parties. It is primarily an
administrative body, rather than an executive
on the model of the European Commission. In
January 2020, the assembly of heads of state and
government appointed South African diplomat
Wamkele Mene as the first secretary general of
AfCFTA.
The AfCFTA agreement provides for a Dispute Settlement Body, which will rule on trade disputes between
state parties. This body will be empowered to create panels of experts to rule on cases where one state party
claims that another has broken the agreement.
These new institutions will coexist with Africa’s RECs, which will continue to play a crucial role in managing
trade on the continent. The agreement explicitly mentions the following eight RECs as “Building Blocks”:
• Common Market for Eastern and Southern Africa (COMESA)

• East African Community (EAC)
• Economic Community of Central African States (ECCAS)
• Economic Community of West African States (ECOWAS)
• Southern African Development Community (SADC)
• Arab Maghreb Union (UMA)
• Intergovernmental Authority on Development (IGAD)
• Community of Sahel-Saharan States (CEN-SAD)
The groups have overlapping memberships. Almost every AfCFTA state party is a member of at least one
REC and many state parties are part of multiple RECs (for example, the Democratic Republic of the Congo is
a member of COMESA, the EAC, ECCAS, and SADC).
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This dual-track system will prevent AfCFTA from developing into a truly uniform economic space. Most
individual REC agreements facilitate deeper economic and political integration than is created by the
continent-wide agreement, which will necessarily create at least some friction at inter-REC borders. Indeed,
Article 19 of the agreement explicitly provides that “state Parties that are members of other RECs, regional
trading agreements and custom unions, which have attained among themselves higher levels of regional
integration than under this Agreement, shall maintain such higher levels among themselves”.
Key Takeaways:
AfCFTA is a nascent trade regime rather than a cohesive institution. Indeed, in many ways the
system created by AfCFTA has more in common with the WTO than the EU. It does create some
limits on the actions of state parties. But it primarily functions as a forum within which state
parties (and RECs) interact at a variety of levels.
This has three key implications:

• The AfCFTA system will remain a work in progress. The agreement has created a regime
within which African states will gradually shape a new legal order. The system will be formed
by the gradual accumulation of negotiated deals.
• The AfCFTA system will create order, but not homogeneity. The AfCFTA agreement explicitly
allows for exceptions, flexibility and differentiated treatment. Even when the agreement is fully
implemented, individual exceptions and regional differentiation in the application of rules will
remain a feature of Africa’s trading system – albeit to a much lesser degree than is the case
today.
• The AfCFTA system will primarily manage trade between RECs, most of which will remain the
key institutions governing trade within their own region. The system will set a common, Most
Favoured Nation-style floor of continental trade liberalisation. But since most trade in Africa
occurs within rather than between regions, RECs will continue to play the leading role in most
regions.
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2
CHAPTER
Economic impacts
1. AGGREGATE ECONOMIC IMPACTS
AfCFTA officially became operational in 2021, but the deal will only begin to have a significant economic
impact when tariff cuts begin in earnest in 2025. Even before then, however, the negotiating process has
already created tangible benefits, such as the publication of the African e-Tariff book.
A variety of studies estimate that the full implementation of AfCFTA could boost continental GDP by 3.5–
4.2% by 2035, compared to a counterfactual in which the deal did not exist (see Fig 2.1). The social impacts of
this increased economic output would be significant. The World Bank estimates that the deal will contribute
to lifting 30 million people out of extreme poverty and another 68 million out of moderate poverty.
Figure 2.1 Effect on Africa’s GDP by 2035, % increase

compared to non-AfCFTA baseline
Source: AfDB (2019), World Bank (2020), Misc.
The size of the economic gain will depend heavily on the degree to which policy-makers continue to push
forward with deeper economic integration. Studies from the African Development Bank (AfDB), World Bank
and others suggest that removing tariffs without going further to focus on Non-Tariff Barriers (NTBs) and
fully implementing Trade Facilitation Agreements (TFAs) would only raise continental GDP by 0.1–0.9%.
Moreover, the mixed experience of past attempts at African economic integration underlines that agreements
by policy-makers are only the first step on the path to implementation. Several of Africa’s existing RECs have
seen trade disputes in recent years after governments refused to comply with their treaty obligations.
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CFC Africa Insights
2. DISTRIBUTIONAL EFFECTS
While evidence suggests that AfCFTA will create economic benefits across Africa, these benefits will
not be evenly distributed. The World Bank estimates that Côte d’Ivoire is the economy where real
incomes will rise furthest as a result of the deal (up by 13.4% by 2035), followed by Zimbabwe (up
by 11.9%), Kenya (up by 11.2%) and Namibia (up by 10.6%). The boost to incomes elsewhere will be
smaller, but the World Bank estimates that the deal will have a positive effect across the continent.
As above, these figures depend on the full implementation of the deal, including TFAs (see Increase in
Real Incomes heatmap).
Additional Increase in Real Incomes by 2035, % change compared to non-AfCFTA baseline
Source: World Bank (Change by 2035)
There are a wide variety of reasons why the benefits of the deal will vary among the different members.
Trade liberalisation will naturally boost small and medium-sized economies more than large ones.
(Access to Nigeria’s domestic market creates more opportunities for Togolese firms than access to
Togo’s market does for Nigerian ones.)
Benefits will also be larger for economies where tariff levels are currently high. Figures from the World
Bank show that South Africa’s trade-weighted, pre-AfCFTA tariff on African imports was just 0.5%.
Removing this will have a very small effect on domestic price levels and will probably not encourage
much new trade. In Cameroon, by contrast, the pre-AfCFTA weighted tariff was 12.2%. In general, pre-
AfCFTA tariffs were highest in West and Central Africa. While the UEMOA states have achieved a high
level of integration among themselves, barriers between Francophone and Anglophone West Africa
remain high (see Fig 2.2).
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Figure 2.2 Pre-AfCFTA Trade-Weighted Tariff on African Imports, %
Source: World Bank
The deal will also provide more benefits to economies that sit at the borders between existing REC-level
trading regimes or that already trade across inter-REC boundaries. AfCFTA will not do anything to liberalise
trade between Uganda and Kenya, for example, or between Botswana and South Africa. The large gain to Côte
d’Ivoire, by contrast, comes partially because that country will gain increased trade access to Anglophone
West African markets like Ghana and Nigeria.
3. KEY ECONOMIC EFFECTS
While AfCFTA will have a variety of impacts, we

have highlighted three key channels through
which the deal will have a positive economic
impact on Africa. These channels will be more or
less important in individual countries, but all will
have some effect across the region.
First, AfCFTA will reduce import costs and

increase consumer choice. The removal of tariffs
will bring down the cost of imported goods from
elsewhere in Africa, helping consumers across
the continent. The reduction in import costs will
be particularly welcomed in economies that are
currently suffering from elevated inflation. In some
cases, pre-AfCFTA tariffs were sufficiently high to
entirely prevent trade from taking place. In these
cases, the deal will give consumers the ability to
buy goods that were previously not available to
them.
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CFC Africa Insights
Second, AfCFTA will encourage economic diversification and the creation of cross-border value chains.
While Africa is a large and populous continent, it is mostly made up of small and thinly populated countries.
The median African country in 2023 only had a population of 14.1 million people, fewer than the 23.9 million
found in the median Asian country, and even less than the 18.1 million in the median South American country.
The division of the continent into many small markets discourages economic specialisation because many
of these markets are not large enough to sustain complex industries. This is one of the reasons why many
African economies remain dependent on resource exports.
Trade within Africa is more diverse. Indeed, whereas manufactured goods only make up 17.8% of the
continent’s exports to other parts of the world, manufactured goods make up 43.2% of all goods shipped
within Africa (see Fig 2.3).
Figure 2.3 African Exports by Category, % of total
Source: World Bank
By encouraging intra-African trade and allowing firms to access economies of scale and facilitate the
production of goods that would not be profitable to create for individual African markets, AfCFTA will
encourage the development of manufacturing sectors. Of the new trade created by AfCFTA, almost 85% is
projected to be in higher value-added manufacturing goods (see Fig 2.4). Boosting local manufacturing – a
labour-intensive sector – will help to create jobs, which has been a challenge for many African economies.
The Brookings Institute estimates that fully implementing AfCFTA will create 16 million manufacturing jobs
across the continent.
Figure 2.4 Increase in Intra-Africa Trade by 2035, USDbn
Source: World Bank, (Rise in exports compared to non-AfCFTA baseline)
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The creation of cross-border value chains will also facilitate the transfer of technologies and business
processes from Africa’s more-advanced economies (like Morocco) to its less-developed ones (like those in
West Africa). See Chapter Four for an example of how the regional integration of the automotive sector will
help economies to move up the value chain. By creating integrated manufacturing sectors, African economies
will be better prepared for the Fourth Industrial Revolution.
Third, AfCFTA will reduce Africa’s dependence on foreign markets. The orientation of most African
economies towards consumers in Europe and Asia has left the continent heavily exposed to shifts in demand
in other parts of the world. In recent years, for instance, the continent’s exports have broadly moved in line
with Chinese domestic demand (see Fig 2.5).
Figure 2.5 African Exports to World & Chinese Imports from World,
% year-on-year
Source: BMI
Exposure to Chinese demand was a boon at the turn of the century when rapid economic
growth in the country caused African exports to rise rapidly. Over the coming years, however,
the slowing of the Chinese economy will cap its import demand. Whereas Chinese imports
rose by an average of 9.5% between 2010 and 2019, this figure will slip to 2.7% between 2024
and 2028 (see Fig 2.5). Encouraging deeper economic integration within Africa will reduce the
negative impact of slower growth in China and other traditional export partners.
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CFC Africa Insights
4. IMPLEMENTATION COSTS
Even if the aggregate effect of AfCFTA is to raise total Second, governments will have to adjust to a
economic output across the region, the agreement permanent reduction in tariff revenue. Tariffs push
will create some costs. There are, broadly, three up consumer prices and discourage trade, but they
types of negative economic impact that can be are also a valuable source of revenue for African
expected as the deal is implemented. governments. In general, the governments of Africa’s
less-developed economies depend on import tariffs
First, economies will face temporary disruptions and custom fees more than the governments of
as trade flows reorient and economies adjust to the continent’s richer economies. Tariffs make up
the shock of new competition. The fall in import 27.3% of government revenue in the Central African
prices prompted by tariff reductions will be a boon to Republic (CAR), but just 3.6% of the tax take in South
consumers but may hurt incumbent local producers Africa (see Fig 2.6).
that profited from the previous trade regime. While
economies will eventually adjust and productive
capacity will be reallocated, the disruption may cause
short-term unemployment and reduced production
in certain sectors. The scale of this disruption may
be reduced through payments from the Adjustment
Fund.
Figure 2.6 Customs Revenue, % of Total
Source: World Bank (Latest figures available)
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NEGATIVE ECONOMIC IMPACTS
The majority of the tariff take shown above is levied on imports from outside Africa. One academic study of
ECOWAS states estimated that fully implementing AfCFTA would cut tariff revenue by an average of 4.1%
across the 11 economies surveyed. Based on the most recent budget breakdown, we estimate that this would
cut total revenue by about 0.7%. In even the worst-affected economy (Burkina Faso) the tariff loss is only
equivalent to 1.3% of total revenue (see Fig 2.7). This is hardly an insurmountable challenge, particularly if
the Adjustment Fund helped to bridge the gap during the first few years of the treaty being in effect.
Figure 2.7 Projected Decline in Customs Revenue

Due to AfCFTA
Source: BMI analysis based on Pasara and Dunga, International Journal

of Economics and Finance Studies, 2020
Third, policy-makers will face the challenge

of supporting key industries without using
tariffs. While tariffs are often criticised by
economists as barriers to trade, they can
also be used as a valuable means of allowing
a nascent sector to grow domestically before
being exposed to foreign competition. Tariffs
were, for example, a key part of the industrial
policy that helped to create export-oriented
industries in South Korea and elsewhere in
Asia.
Increased competition may pose a challenge

for industries in less-industrialised AfCFTA
countries that are near to the continent’s hub
economies (Zambian firms, for instance, may
struggle to compete with South African ones).
In these cases, however, policy-makers will
have the option of protecting crucial industries
by using the “excluded list” to maintain tariffs
on a few goods.
26
CHAPTER 3
International
comparisons
1. DEFINING SUCCESS
Comparative analyses of different trade arrangements should always start from the basis that each trade
deal is a response to particular local conditions and political goals. It is, of course, possible to use objective
measures to describe some agreements as ‘deeper’ than others; a trade bloc that evolves into a full customs
union is objectively more integrated than one that does not. But it is wrong to assume that a ‘deeper’ form of
integration is necessarily a better result. The architects of less-integrated trade systems are not necessarily
less ambitious or less successful than those who create more integrated ones; they are aiming for a different
goal.
2. EUROPE’S LONG SHADOW

Indeed, while the EU is often held up as the paragon of regional integration, there are three reasons why
this comparison is often unhelpful.
• First, the EU has strong, independent institutions • Second, the EU is a significantly more political
because it is both an economic and a political and economically homogenous bloc than peers
grouping. From the beginning, the EU and its elsewhere. Unlike regional bodies in Asia or Africa,
predecessor institutions had explicit political and the EU has strict political requirements. And while
strategic goals as well as economic ones. While it levels of economic development do vary across the
is true that today’s EU grew out of the European union, the spread of income levels is narrow. For
Coal and Steel Community, as early as 1957 the instance, the richest EU state (Luxembourg) has a
Treaty of Rome committed to “ever closer union GDP per capita 8.8 times higher than the poorest
among the people of Europe”. The continent has (Bulgaria). Among the AfCFTA states, by contrast,
taken an institution-led route to integration, with the highest GDP per capita (the Seychelles) is 55
the supranational bodies like the Commission given times higher than that of the poorest (Burundi) (see
state-like powers in some areas and the ability to Fig 3.1).
meaningfully check the sovereignty of national
governments.
Figure 3.1 Selected Regional Blocs

GDP per Capita, USD
Source: BMI (2023, figures shown on logarithmic scale

or comparison purposes)
28
CFC Africa Insights
• Third, the economic and legal institutions of integration in Europe form a series of concentric circles
centred on the region’s largest economies, Germany and France. Other countries are involved in a sub-set
of the continent’s economic institutions, but these two (often called the “dual motor” of European integration)
are at the centre of all of them (see EU Euler diagram).
European Union Euler Diagram
Source: BMI
29
There is no state – or even pair of states – able to play this role within AfCFTA. Instead, Africa’s regional
economic integration has been pluricentric and driven by smaller economies in different sub-regions of the
continent. Rather than an orderly system with a clear centre, Africa has created a variety of institutions of
different levels of integration across the continent (see Africa Euler diagram).
African Euler Diagram
Source: BMI (The authorities in Burkina Faso, Mali and Niger withdrew from
ECOWAS in January 2024)
30
CFC Africa Insights
3. LOOKING EAST
While the clear differences between structural conditions in Africa and Europe make the latter an unhelpful
comparator, Asia may provide a better model. Unlike the orderly system of concentric circles created by the
EU – and policed by the bloc’s strong institutions – trade in Asia’s web of overlapping trade deals has been
dismissively referred to as a “noodle bowl” of conflicting treaties (see ASEAN Euleur diagram).
Asian Euler Diagram
31
There are three key reasons why an analysis of the Asian experience is more
likely to be instructive.
• First, Asia’s trade system is based on variable geometry, includes

overlapping organisations, and is not centred around the region’s largest
economy. Indeed, the region’s three largest economies – China, India and
Japan – play comparatively peripheral roles in the network. This is, admittedly,
changing as Beijing creates more trade agreements – like the Regional Comprehensive
Economic Partnership (RCEP). For now, however, the system is more disparate. If any actor
plays the role of an economic centre, it is the Association of South East Asian Nations (ASEAN), a group of
mid-sized economies that have fulfilled the role of a mediator and facilitator in regional negotiations.
• Second, unlike Europe, Asia’s trade system includes states with a wide variety of incomes and political
systems. The agreements shown above cover countries at almost every income level (from Laos to South
Korea). Trade deals have largely eschewed political conditions and have facilitated the inclusion of countries
with a variety of regime types. Indeed, several of Asia’s trade deals include economies that have both different
regime types and opposing international orientations. The RCEP, for example, includes both China as well as
key US allies such as Australia, South Korea and Japan.
• Third, Asia’s trade system has not required the creation of strong, independent institutions. ASEAN does,
admittedly, have a secretariat based in Jakarta, but national leaders within the bloc make the key decisions.
For example, a “Coordinating Committee” appointed by national governments has led progress on trade
liberalisation. Institutions created by other agreements – like the RCEP or the Trans-Pacific Partnership are
even weaker, and bodies comparable to the European Commission do not oversee trade agreements in the
region.
The situations are, of course, not identical. While

Asia’s trade network is not as centralised as the
EU’s, most deals still include ASEAN as central
player. And Asia’s trade landscape has no parallel
for the overlapping customs unions that complicate
trade within Africa. Even so, the Asian experience
suggests several key reasons for optimism about
the prospect of AfCFTA economic integration.
First, significant economic integration and

the creation of cross-border value chains is
possible without the creation of EU-style legal
homogenisation. Many Asian economies export
as much to their home region, as measured as a
share of GDP, as economies anchored within the EU
system do to theirs (see Fig 3.2).
32
CFC Africa Insights
Figure 3.2 Exports to Region, % of Total Exports
Source: Trade Map (2022, *EU Member, **ASEAN member)
Moreover, Asia’s trade model has facilitated the creation of complex, cross-border value chains. Asian
economies not only export finished goods to one another, they also export and re-export components that
are used to create final products. For example, South Korea exports semiconductors that are fitted into
components in China and then assembled into housing built in Vietnam. This form of cross-border production
creates jobs across the region and allows economies at different income levels and productive capacities to
integrate their markets. Creating cross-border value chains like this is a key goal of AfCFTA.
33
Second, the legal and technical challenges created by overlapping trade deals can be managed. In the Asian
trade system, many economies are part of multiple trade deals (some of them nested within RCEP, but some
not). This creates significant complications, at least on paper. Vietnam’s exports to Japan, for example, are
covered by three different trade agreements (see Vietnam & Asian Trade Deals table). Even so, the country
sends 6.1% of its exports to Japan (see Fig 3.2).
Vietnam – Asian Trade Deals Covering Exports
Vietnamese Exports to: Relevant Trade Deals
RCEP, ASEAN–Japan Comprehensive Economic Partnership,

Japan Comprehensive and Progressive Agreement for Trans-Pacific
Partnership
ASEAN FTA, RCEP, Comprehensive and Progressive Agreement for

Singapore
Trans-Pacific Partnership
China ASEAN–China FTA, RCEP
Thailand ASEAN FTA, RCEP
South Korea ASEAN–South Korea FTA, RCEP
Australia ASEAN–Australia–NZ FTA, RCEP
India ASEAN–India FTA
Source: BMI
Third, variable geometry can allow smaller states to play a key role as a facilitator of trade liberalisation.
Whereas a clear core led Europe’s trade integration, the reduction of trade barriers in Asia was the result
of multiple deals that were slowly knitted together by smaller states. Political and historical factors have
prevented Japan, China or India from playing the central role that Germany and France have played in
Europe. Instead, ASEAN, which even collectively is only Asia’s third-largest economy, has acted as a valuable
convener.
In Africa, COMESA might be able to play a similar role as a central point for negotiation. Its members
represent a broad cross-section of medium-sized markets (for example, Ethiopia, Kenya, Zambia and the
DRC). The overlap of its membership with SADC, ECCAS and the EAC may also give the COMESA states a key
role as coordinators, since any agreement that is reached among the COMESA states can then be spread to
three of the other RECs.
34
Key Takeaways:
• Economic integration in Africa will not follow the orderly, institution-driven model
seen in Europe. RECs will remain the key arbiters of trade within their respective sub-
regions. AfCFTA is unlikely to lead to the creation of strong, independent institutions like
the European Commission.
• Europe does not offer the only model of economic integration. Other regions of the
world have achieved deep economic integration by following different paths.
• The Asian trade system formed by ASEAN may be a more useful comparison. Trade
in Asia is managed by a collection of overlapping trade deals, which are directed by
national governments. This suggests that African policy-makers should focus on
reducing practical barriers to trade rather than on creating a system that conforms to
the institution-based model created in Europe.
CHAPTER 4
Sector Case studies
CFC Africa Insights
This section provides an analysis of four case studies that exemplify the sort of industry-specific opportunities
that AfCFTA will provide across the continent. Each case study will focus on a given industry in one or two key
markets. The selected industries are automotive (Morocco), agro-processing (Côte d’Ivoire), clothing and
apparel (East Africa) and energy transition (various economies).
1. AUTOMOTIVE SECTOR (MOROCCO)
Why Automobiles?
AfCFTA offers significant opportunities to Morocco’s automobile sector, which is already one of the
continent’s most developed. Greater trade integration with African partners (particularly in North and West
Africa) could create economies of scale. While Morocco is particularly well placed to benefit from the creation
of cross-border value chains, the sector also offers opportunities to economies across the region.
There are two reasons why the automobile sector is a key driver of global trade. First, global demand is
both large and rapidly growing. In 2022, total cross-border trade in cars and car components was worth
USD1.6 trn. This is more than the total value of crude oil shipments (USD1.2 trillion) and twice the value of
natural gas trade (USD788bn) (see Fig 4.1).
Figure 4.1 Global Exports, USDbn
Source: Trade Map (2022, *Includes both finished vehicles and components)
37
Second, modern automobile sectors require complex supply chains that often cross international borders.
Even in the United States or China, most manufacturers are unable to source all their necessary inputs
domestically. Most big car production hubs rely heavily on regional networks, with inputs moving back and
forth across the United States, Mexico and Canada or Germany, the Czech Republic and Poland. These cross-
border value chains allow economies that are not yet able to produce complete cars to play a role as a
supplier of simpler intermediate products. This distributes the value across a large number of producers in
various countries.
AfCFTA offers two key opportunities for the Moroccan automotive sector as a source for low-cost inputs and
as a destination for finished exports.
Africa as a Zone of Production

By integrating Morocco’s well-developed automotive Infrastructure challenges have, admittedly, created
sector with neighbouring economies, Moroccan obstacles for firms creating cross-border value
producers can benefit from lower labour and chains in Africa. Reduced tariffs, however, will
material costs elsewhere in Africa. Indeed, sourcing significantly reduce costs. For example, Nigeria
lower added-value components and services abroad currently charges a Most Favoured Nation (MFN)
will help Moroccan firms remain competitive as tariff of 5% on unassembled cars, which are imported
domestic wages rise. While many analyses of trade in pieces and then finished domestically. The tariff
liberalisation focus on export opportunities, Morocco that it charges on Moroccan car sets, however,
also stands to benefit by increasing its imports of is set to fall to 0% by 2030 (see Fig 4.2). Exporting
necessary inputs. Modern economies almost always unassembled Moroccan vehicles to Nigeria for final
import in order to export. processing would create jobs in both countries.
Indeed, Nigerian policy-makers would probably
prefer to import unassembled vehicles for final
completion in Nigeria than to import ready-made
cars from elsewhere.
Figure 4.2 Nigerian Tariff on Unassembled Cars
Source: AfCFTA e-Tariff book
38
CFC Africa Insights
Initially, the highest value-added parts of the production process, like the manufacture of major engine
components, will probably remain in Morocco (and South Africa). Economies with less-developed industrial
bases will either produce basic materials (like leather and glass) or assemble the final product (see Automotive
Value Chain table). Moroccan demand for African inputs will rise when the country begins to produce electric
vehicles around 2026, which will require lithium, copper and other transition minerals produced on the
continent (see fourth case study).
Indicative Automotive Value Chain
Production Stage Output Share of Value Addition

Tier 1 Basic Materials (e.g. steel, leather, rubber, glass) 30%
Tier 2 Sub-components (e.g bodies, welding, bending, stamping)

50%
Tier 3 Major components (e.g engines, steering, electronics)
Tier 4 Final vehicles 20%
Source: ODI
Economies that join the value chain as producers of Tier 1 inputs can eventually “graduate” to producing
higher value-added goods. Indeed, this is how Morocco’s own automotive sector developed in the 2000s. At
the turn of the century, the country mostly produced simple components to be used as inputs in Europe, but
it now produces entire cars (see Fig 4.3).
Figure 4.3 Moroccan Passenger Car Exports, % of total value
Source: Trade Map
39
Africa as a Destination for Exports
Automotive demand within Africa is, admittedly, currently small. Figures from
BMI Research suggest that just 1.4 million cars will be sold across the continent
in 2024. Sales will be concentrated in South Africa and other southern and
eastern markets, far from Morocco (see Automobile Sales map).
Automobile Sales by Country, ’000
Source: BMI (2024 estimate. No estimates for countries shaded in grey)
Sales will, however, rise sharply over the coming years. By the end of the decade, sales will jump by 40% (see
Fig 4.4). Most of the growth will occur outside South Africa, with the country’s share of total sales falling from
37% to 27%. This will create significant opportunities in North, West and Central Africa.
40
CFC Africa Insights
Figure 4.4 Africa, Annual Vehicle Sales, million
Source: BMI
If things remain as they are, the vast majority of these vehicles will be imported, with about 96% of them
coming from outside of Africa. While there is some diversity from where countries in Africa source their
vehicles (Morocco mostly imports European autos, Kenyans prefer Japanese), the continent’s biggest auto
markets all rely on foreign manufacturers to meet their needs (see Fig 4.5).
41
Figure 4.5 Africa, Vehicle Imports, % of total
Source: Trade Map (2022, share shown by value. Countries are ordered left to right in order of
their automobile imports)
Moroccan suppliers are, however, in a good position to gain market share. The country is already building
financial, political and economic ties with rapidly growing markets in West Africa. Morocco’s location –
and well-developed port infrastructure – makes it an obvious export hub to meet demand in West Africa.
Moroccan producers will benefit from significant tariff reductions on trade in both finished automobiles and
components.
Key Takeaways:
• Morocco’s automotive sector is well placed to benefit from reduced tariffs on cars and
automobile components. The country’s domestic sector has grown rapidly and has reached a
level of complexity allowing it to expand abroad.
• Integrating other African economies into Morocco’s value chains will lower costs and
boost competitiveness. While few economies have the industrial base to produce complex
components, they can produce basic inputs (like glass). Others – notably Nigeria – could be
sites of final assembly for Moroccan-based firms.
• While African auto sales are small, they are set for rapid growth. Car sales on the continent
will rise by 40% over the rest of this decade. The overwhelming majority of this demand will
have to be met by imports. While South Africa has a large market share in southern Africa,
Morocco is well placed to export to West Africa.
42
CFC Africa Insights
2. AGRO-PROCESSING (CÔTE D’IVOIRE)
Why Agro-processing?
AfCFTA will create larger and more-resilient regional markets for processed and packaged food. This
will encourage the modernisation and industrialisation of the food value chain, which offers the potential to
transform an industry that is the largest single employer across most of Africa (see Fig 4.6). Modernising this
sector and creating value chains will help to boost the income of hundreds of millions of people. Modernising
the agricultural sector of Africa’s less-developed economies will also create spill-over benefits for the
continent’s richer economies by boosting demand for inputs such as fertiliser and farm equipment.
Figure 4.6 Agriculture, % of total employment
Source: ILO (2021 or latest)
Why Côte d’Ivoire?

Côte d’Ivoire’s location, reliable infrastructure
and history as an agricultural exporter all provide
a strong foundation for the country to serve as a
processed food hub for West Africa. Côte d’Ivoire is
already the economic centre of the UEMOA states
and is a regional base for many foreign firms.
The country also has a larger and more-reliable
electricity network than most of its peers (see Fig
4.7), which is crucial for both processing many foods
and creating cold chains to transport perishable
goods.
43
Figure 4.7 Population with Access to Electricity, % of total
Source: World Bank (2021 or latest)
Côte d’Ivoire is also already a key agricultural exporter. While the country is best known as the world’s top
cocoa exporter, it has a large and diversified agricultural sector, exporting cocoa, nuts and palm oil – all
products for which there is demand abroad.
Food Security
Developing a domestic agro-processing sector will
improve domestic food security by reducing waste.
Wastage levels in Africa are among the highest
in the world because poor infrastructure often
causes unprocessed food to spoil during transport.
Approximately 40% of mangos grown in Côte d’Ivoire
are lost due to spoilage caused by fruit diseases and
inadequate post-harvest facilities. Spoilage rates are
similar for tomatoes grown in Ethiopia or Uganda. In
Nigeria, the figure is 76%. If these products could
be dried, juiced or canned domestically they could
successfully be brought to market. This would boost
supply and reduce food prices.
Export Potential
Côte d’Ivoire’s efficient agricultural sector means
that it produces surpluses of many of the goods
demanded by its neighbours. For example, while
palm oil is a staple food product across West Africa,
most of Côte d’Ivoire’s neighbours are dependent
on imports to meet domestic demand (see Fig 4.8).
The removal of agricultural tariffs could help Ivorian
producers meet this demand, which is currently
being filled by Asian producers.
44
CFC Africa Insights
Figure 4.8 Palm Oil, Domestic Production Balance

(Consumption less Production), ’000 tonnes
Source: USDA
45
With the right investment, Côte d’Ivoire could also produce packaged and processed foods using domestic
palm oil and other products. Urbanisation and rising incomes are driving demand for convenience foods,
like crisps, bottled drinks and instant noodles, in West Africa. In 2023, for example, the Ivorian government
signed a USD100mn deal to construct a 200,000-tonnes cashew-processing plant in the ARISE industrial
zone.
Côte d’Ivoire’s unique position as the world’s leading

cocoa producer also provides an opportunity for it
to move up the value-added ladder in a significant
luxury product. Currently, only about a quarter of
the country’s cocoa crop is milled domestically,
which has prevented the creation of downstream
industries. Only a tiny share is transformed into
finished chocolate. Indeed, European processing
firms capture most of the final value of the chocolate
sold in shops around the world. Germany earns
more exporting finished chocolate than Côte d’Ivoire
does exporting raw beans (see Fig 4.9).
Figure 4.9 Cocoa and Chocolate Exports,

USDbn
Chocolate
Cocoa Beans
46
CFC Africa Insights
Investing in the domestic milling and chocolate-making sector could allow Côte d’Ivoire to use an African
product to meet African demand. In 2022, the continent imported USD679mn worth of chocolate, but Côte
d’Ivoire provided just USD1.2mn of this (see Fig 4.10).
Figure 4.10 Chocolate Exports to Africa, USDmn
Cross-Border Value Chains

Modernising and industrialising the agricultural sector in Côte d’Ivoire (and other AfCFTA states) would also
create cross-border value chains by boosting demand for agricultural inputs produced in Africa’s more-
developed economies, notably Morocco and South Africa. If the higher demand for African agricultural
products boosted African farmers’ incomes, they could invest in expensive farm inputs that they cannot
currently afford. Low incomes and a lack of access to capital mean that farmers in Côte d’Ivoire and across
most of Africa are much less likely to use modern fertilisers or tractors than their peers elsewhere. Egypt is
something of an exception (see Fig 4.11).
47
Figure 4.11 Fertiliser Use, kg per km of Arable Land (LHS)

and Tractors per 100sq km of Arable Land (RHS)
Source: FAO, World Bank (2021 or latest)
Morocco is already one of the world’s largest In the short term, demand for tractors and other
exporters of fertiliser, and the country stands to gain farm machinery will probably be met from abroad.
if local demand for one of its key products increases. China is currently the continent’s main supplier of
This is a powerful example of how the AfCFTA will these goods (see Fig 4.13).
allow African economies to benefit from rapid growth
in their neighbours. Egypt and South Africa are also
established suppliers to their continental peers.
Figure 4.12 African Fertiliser Imports by Source, Figure 4.13 African Tractor Imports by Source,
USDmn USDmn
Source: Trade Map (2022) Source: Trade Map (2022)
48
CFC Africa Insights
But South Africa’s industrialised agricultural sector could supply the continent because lower tariffs give it
a cost advantage over competitors in Asia and elsewhere. While Côte d’Ivoire charges an MFN tariff of 5% on
single-axle tractors, the tariff that it charges on imports from South Africa will fall to 0% by 2030.
Figure 4.14 Côte d’Ivoire Tariff on Imported Single-Axle Tractors, %
Source: AfCFTA e-Tariff Book (Note: HS Code 8701.10)
Key Takeaways:
• Agriculture remains Africa’s largest employer and key economic sector. Modernising and
industrialising the food chain can boost the incomes of hundreds of millions of people. Rising
output will also help to improve food security.
• Investors should focus on the storage, cold chain and food-processing sectors. Côte d’Ivoire
is well placed to act as a hub for food exports to the rest of West Africa, where demand for
processed food is rising quickly.
• The modernisation of the agricultural sector will create significant demand for inputs
produced elsewhere in Africa. Moroccan fertiliser and South African farm equipment-makers
should target new markets in West Africa.
49
3. CLOTHING AND APPAREL (EAST AFRICA)
Why Clothing and Apparel ?

The manufacture of clothing and apparel (including footwear) is a labour-
intensive industry that has provided a first step towards industrialisation
for economies across the world. Clothing manufacture does not require
advanced technologies or complex input products. It relies on relatively
simple agricultural inputs and abundant low-wage labour. The most
recent success story in this industry has been Bangladesh, a resource-
poor, low-income economy that has transformed itself into the world’s
second-largest exporter of ready-made clothes. The country’s export
earnings from the sector have risen 30-fold over the past 20 years (see
Fig 4.15).
Figure 4.15 Bangladeshi Apparel and Clothing Exports, USDbn
Source: Trade Map (Comparable figures not available for Bangladesh in 2014)
50
CFC Africa Insights
Local demand is high. Africa’s large and growing population makes it an

attractive market for consumer staples like clothing. Figures from BMI suggest
that clothing sales on the continent will rise by 36% between 2024 and 2028,
reaching USD109bn (see Fig 4.16).
Figure 4.16 Africa, Spending on Clothing and Footwear, USDbn
Source: BMI
African economies have the raw material needed to meet this demand
domestically. Cotton is grown in most sub-regions of Africa, and countries in the
West and East of the continent are also major leather producers. Indeed, cotton
production currently far outstrips local demand, with much of the crop being
exported raw (see Fig 4.17).
Figure 4.17 African Cotton Production and Domestic Use,

millions of 480lb bales
Source: USDA
51
Admittedly, this surplus of cotton exists because of the decline of Africa’s

textile and clothing industry in the 1990s and 2000s. The domestic processing
of cotton has fallen by 50% since 1992 (see Fig 4.17). This decline was driven
by cheap imports from China and elsewhere in Asia. African consumers
spent USD3.5bn on Chinese-made clothing in 2022, ten times as much as
they did on apparel made in South Africa (see Fig 4.18).
Figure 4.18 African Clothing Imports by Source, USDmn
How AfCFTA Can Help

Lower intra-Africa tariffs, however, will drive down the price of African
clothing and help to win back market share. Most African countries impose
high tariffs on imported clothes, whether they come from Africa or Asia.
Under AfCFTA the tariff on African products will be reduced (and eventually
removed entirely).
This will lower the cost of African-made clothes compared to Asian rivals.
Fig 4.19 shows the tariff charged on Ethiopian-made clothing in South Africa,
Nigeria and Egypt. In 2021, a shipment of Ethiopian-made shirts would face a
tariff of 48% entering Egypt, but by the end of 2024, this should be cut to 0%.
Since tariffs will still be applied to Chinese and Bangladeshi shirts, this will
help Ethiopian firms to boost exports.
52
CFC Africa Insights
Figure 4.19 Import Tariffs on Ethiopian Clothing Imports, %
Source: AfCFTA e-Tariff Book (Tariff line 43031000, “Articles of apparel and clothing accessories”)
Beyond the basic economic theory, we have strong evidence that tariff-free market access can boost African
clothing exports. Tariff-free access to the US market provided by the African Growth and Opportunity Act
(AGOA) caused clothing exports from Lesotho and Eswatini to rise sharply.
53
Why East Africa ?

East Africa is a resource-poor, labour-rich sub-region of Africa. This part of the continent depends heavily
on labour-intensive sectors such as agriculture, tourism and light manufacturing. Indeed, while clothing
and apparel sectors across much of Africa have declined in recent years as a result of Chinese competition,
East Africa has remained a relative outperformer. Currently, however, East African clothing industries are
primarily oriented towards meeting demand in Europe and the United States. Southern African countries
dominate the intra-African clothing trade. In many cases this is due to trade within the Southern African
Customs Union (SACU) (see Fig 4.20). When AfCFTA reduces intra-African trade barriers, East African
countries will be well placed to gain market share.
Figure 4.20 Sub-Saharan African Clothing Exports, USDmn
54
CFC Africa Insights
Most of East Africa has the necessary infrastructure to sustain light manufacturing. Kenya’s electricity grid
is among the most reliable in Africa, and electrification works in Ethiopia have increased access dramatically
in recent years. The region has large port facilities and significant investment is boosting intra-regional
rail connections. This could help East African producers to reach consumers across Africa, including in the
west of the continent, where we expect that demand growth will be fastest. Wages in the sector are very
competitive, with garment workers in Ethiopia paid less than those anywhere else in the world (see Fig 4.21).
Figure 4.21 Monthly Garment Worker Wages, USD
Source: UNDP (2019)
Indeed, East Africa is already home to a positive example of using clothing production to move up the value
chain. In 2005, Ethiopia mostly exported raw cotton, which created few jobs and little export earnings. More
recently, however, the country has succeeded in creating a domestic clothing industry that turns a raw
agricultural product into processed goods for sale abroad. This has boosted export earnings tenfold (see Fig
4.22). Ethiopia also had some success in using its leather sector as an input in the production of footwear,
but disruptions caused by the Covid-19 pandemic and subsequent political unrest caused production to fall in
the early 2020s. The future development of Ethiopia’s garment sector depends heavily on the country being
readmitted to the US AGOA trade deal, from which it was expelled in 2022.
55
Figure 4.22 Ethiopia Exports, USDmn
Source: Trade Map
Key Takeaways:
• The clothing and apparel sector offers an unparallel opportunity to for labour-rich countries
to begin the industrialisation process. Bangladesh is an example of how a low-income economy
can rapidly become a major exporter.
• Africa has both the necessary raw inputs (cotton, leather, labour) and the demand to support
a large clothing industry. The decline of the textile industry in the 1990s was prompted by foreign
competition. But the reduction of intra-African tariffs will give significant cost advantages.
• East Africa has a large labour force, a strong infrastructure base and in some areas has
already succeeded in moving up the value chain. Ethiopia and Kenya are both well placed to
become suppliers to key African consuming markets, including Egypt and South Africa.
56
CFC Africa Insights
4. ENERGY TRANSITION (VARIOUS ECONOMIES)
The State of Electrification The Role of AfCFTA

The experience of fast-growing economies in Asia Unlike many modern trade deals, AfCFTA does not
suggests that cheap and reliable electricity is a include binding environmental commitments or cite
necessary condition of structural change and poverty a just energy transition as a goal. Even so, the deal
alleviation. But while African countries must reach will still boost the growth of the continent’s clean
the same level of electrification as Asian peers, they energy sector through encouraging more intra-
face the challenge of doing so in the context of a Africa electricity trade and facilitating the creation
global energy transition: the carbon-intensive path of cross-border value chains, allowing for the local
taken by China and India is no longer open. manufacture of goods necessary for the energy
transition.
Integrating National Power Grids

Cross-border electricity trade can bring down generating costs through economies of scale, encourage
investment in countries where generation potential outstrips local demand and create more-resilient grids.
The continent already has five so-called “power pools” in Western, Central, Southern and Eastern Africa and
the Maghreb. All these pools, however, have suffered from underinvestment, regulatory inefficiencies and
a lack of trust between governments. AfCFTA can promote integration within and between these regional
agencies by facilitating regulatory alignment. The creation of the AfCFTA dispute-resolution system will also
help to build trust between governments.
57
Existing Power Pools Already Cover Most of Africa
Source: BMI
58
CFC Africa Insights
Indigenising the Electrification Value Chain

AfCFTA can also help to accelerate Africa’s energy transition by creating a single market for the goods and
services needed to generate, transfer and store clean power. This will bring down prices and encourage the
creation of these goods within Africa. African economies produce huge amounts of the minerals necessary
for the energy transition, including the majority of the world’s cobalt and platinum (see Fig 4.23). But most
of the output is concentrated in economies with limited industrial bases (for example, Zambia and the DRC).
AfCFTA can help to build links between the continent’s miners and its manufacturers, encouraging the
production of high value-added goods, like batteries or solar panels, in Africa itself.
Figure 4.23 Energy Transition Minerals,

Africa’s Share of Global Output, % of total
Source: BMI (2023)
Indeed, the cost of refining these minerals in Africa has already fallen, and parts of the continent can now
compete with China, which is the world leader in metal refining (see Fig 4.24).
Figure 4.24 Cost to Delivering Refined Product to EU, USD/tonne
Source: Sustainable Energy for All (Note: Lithium cost excludes transport)
59
While there are many opportunities, the solar power sector stands out. The International Energy Agency
estimates that Africa has 60% of the world’s best solar resources. The average African country can generate
much more from solar than peers elsewhere (see Fig 4.25).
Figure 4.25 Average Long-Term Practical Potential Solar Energy

Output (kWh/kWp/day)
Source: Global Solar Atlas
60
CFC Africa Insights
And while solar power has traditionally been a costly form of energy, prices have fallen sharply. The cost of
unsubsidised solar PV levelised cost of electricity (LCOE) has decreased by about 90% from USD400/MWh in
2011 to USD41/MWh in 2022. Indeed, many analysts expect that solar will play a key role in Africa’s electrical
transition over the coming years (see Fig 4.26).
Figure 4.26 Total Generational Capacity (GW)
Source: Sustainable Energy for All, Lazard, IEA
This will create a huge demand for solar panels and other equipment. Currently, most of these goods are
imported, with most bought from China. South Africa is the only African economy that ranks in the continent’s
top ten sources of solar panel components, and it only shipped USD29mn in 2022 (see Fig 4.27).
Figure 4.27 African Solar Panels and Components Imports (LHS)

and Sources (RHS), USDmn
61
The large market created by AfCFTA, however, will encourage the domestic production of these goods in
parts of Africa, which can then become suppliers to their neighbours. Recent figures suggest that, while the
cost of producing solar panels is still more expensive in Africa than in China, the gap is shrinking (see Fig
4.28).
Figure 4.28 Solar Panel Production Cost (US¢/W)
Source: Sustainable Energy for All (2023 estimate, US¢/W stands for US cents per watt)
AfCFTA will bring down prices further by cutting import prices, creating economies of scale and facilitating
the flow of investment and skilled personnel. South African firms, for example, are already investing to
create production centres in Zambia, which is rich in key minerals and where electricity demand is growing.
This should allow for the creation of some key solar machinery hubs that produce for the rest of the region.
Sustainable Energy for All, an international NGO, has compared the potential of 14 African markets as
centres for the solar industry. Based on their infrastructure, domestic manufacturing sectors and regulatory
environments, the group highlighted Morocco, South Africa and Egypt as having the most potential (see
Potential Solar Power Hubs map).
62
CFC Africa Insights
Potential Solar Power Hubs
Source: Sustainable Energy for All (2023 Estimate)
Key Takeaways:
• Electrification is a necessary precondition for meeting Africa’s economic and social goals.
• AfCFTA can encourage cooperation and the creation of larger power pools. Increased trust
among states and more investment will also help to deepen integration within the existing sub-
regional entities.
• Africa is currently dependent on imports for the capital goods needed for further electrification
and the energy transition, but intra-African trade can help to boost domestic production.
Regional hubs can benefit from economies of scale, transforming African resources into crucial
technological goods.
63
Conclusion
& Takeaways
• AfCFTA is still a work in progress. Investors should not expect an immediate change of circumstances
on the ground. Indeed, since much will depend on the implementation of the system, it is important not
to make too many assumptions too soon.
• AfCFTA will not create regulatory homogeneity. Unlike the EU, AfCFTA is not creating a homogenous
legal order or strong institutions. National governments and individual RECs will remain key players
in the system. While this process will be more complex and less orderly than the system in Europe, the
experience of Asia suggests that it can still significantly boost trade and economic growth.
• Indeed, the potential upside is significant. Even if the deal is only partially implemented, it will still
appreciably raise African aggregate GDP. The gains will be larger for the region’s smaller economies.
• The impact of the deal will vary significantly between different economies and industries. This
report has highlighted four possible winners from the deal, but there will be many more.
• Increased cross-border value chains can produce big second-order effects. In the agro-processing
example, a modernised agricultural sector in Côte d’Ivoire will not only boost that country’s exports
but also provide a new market for inputs sourced elsewhere in the continent.
• AfCFTA will encourage the creation of regional economic hubs. While benefits will be felt across
the region, Africa’s more-industrialised economies will be better placed to meet increased demand.
Morocco, South Africa, Kenya and Côte d’Ivoire are a few key examples.
• AfCFTA can help to bridge the divide between North Africa and sub-Saharan Africa. The deal will
encourage trade across this conceptual frontier, which is often seen to divide the continent into two
separate and unrelated economic zones. Morocco is well positioned to benefit from more interaction
between the northern and southern regions of Africa.
64
CFC Africa Insights
Glossary
• AfCFTA Secretariat: An administrative body based in Ghana that will manage AfCFTA on a day-to-day
basis (see Chapter One).
• ASEAN: The Association of South East Asian Nations is a regional community made up of Brunei,
Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
• Excluded Goods: Products on which AfCFTA state parties will continue to impose tariffs even after
the agreement is fully in force.
• Guided Trade Initiative (GTI): A pilot project under which eight AfCFTA state parties have agreed to
implement AfCFTA trading rules on a set list of goods. The initiative covers Cameroon, Egypt, Ghana,
Kenya, Mauritius, Rwanda, Tanzania and Tunisia (see Chapter One).
• Inter-governmental: Describing a group or process that is driven by negotiations between

governments rather than led by an independent supranational institution.
• Non-Tariff Barrier (NTB): Obstacles to international trade that do not involve traditional import
tariffs. NTBs can take various forms, including regulatory requirements, technical standards, licensing
procedures and quotas (see Chapter One).
• Regional Economic Community (REC): The existing, sub-regional institutions that manage trade within
different parts of Africa. The AfCFTA treaty describes the following eight RECs as “building blocks”
of AfCFTA: Common Market for Eastern and Southern Africa (COMESA), the East African Community
(EAC), the Economic Community of Central African States (ECCAS), the Economic Community of West
African States (ECOWAS), the Southern African Development Community (SADC), the Arab Maghreb
Union (UMA), the Intergovernmental Authority on Development (IGAD) and the Community of Sahel-
Saharan States (CEN-SAD) (see Chapter One).
• Sensitive Goods: Products on which AfCFTA state parties will not have to remove tariffs until 2033.
Can make up 7% of all tariff lines.
• Supranational Institutions: International bodies, like the European Commission, that are empowered
to act independently of individual states and which can impose meaningful limits on their members
(see Chapter Three).
• Tariff: A charge imposed on imported goods.
• Variable Geometry: A flexible approach in which some integration sometimes happens among a
sub-set of a wider group.
65
Sources
Cited
Abreha, Kaleb G.; Woubet Kassa; Emmanuel K.K. Lartey; Taye A. Mengistae; Solomon Owusu; and Al-
bert G. Zeufack, 2021, “Industrialisation in Sub-Saharan Africa: Seizing Opportunities in Global Value
Chains”, World Bank
Adeniran, Adedeji; Chukwuka Onyekwena; Sone Osakwe; and Chimere Iheonu, 2021, “How Can the
AfCFTA Improve Energy Efficiency and Access in Africa?”, IISD
Agarwal, Prachi; Anthony Black; Alberto Lemma; Vuyiswa Mkhabela; and John Stuart, 2022, “The
African Continental Free Trade Area and the Automotive Value Chain”, ODI
Attia, Benjamin, 2022, “Five was the African Continental Free Trade Agreement can de-risk the
continent’s power sector”, Energy for Growth Hub
AfCFTA Secretariat, 2024, AfCFTA e-Tariff Book
AfCFTA Secretariat and UNDP, 2021, “The Futures Report 2021: Which Value Chains for a Made in
Africa Revolution”
African Union, 2018, “Agreement Establishing the African Continental Free Trade Area”
BMI Research Team, 2023, “Towards 2050: Megatrends in Industry, Politics, and the Global Economy”
Fitch Solutions
Brookings, 2019, “Africa’s Industrialisation under the Continental Free Trade Area: Logistical
strategies for global competitiveness”
Coulibaly, Souleymane; Woubet Kassa; and Albert G. Zeufack, 2022, “Africa in the New Trade
Environment Market Access in Troubled Times” World Bank
Demirguc-Kunt, Asli; Leora Klapper; Dorothe Singer, 2017, “Financial Inclusion and Inclusive Growth:
A Review of Recent Empirical Evidence” World Bank
Echandi, Roberto; Maryla Maliszewska; and Victor Steenbergen, 2022, “Making the Most of the African
Continental Free Trade Area: Leveraging Trade and Foreign Direct Investment to Boost Growth and
Reduce Poverty”, World Bank
International Labour Organization “ILO Stat”
66
CFC Africa Insights
International Monetary Fund, 2023, “Financial Access Survey”
Maliszewka, Maryla and Michele Ruta, 2020, “The African Continental Free Trade Area: Economic and
Distributional Effects” World Bank
Manduna, Calvin and Taku Fundira, 2022, “How to Ensure that the AfCFTA Propels Africa’s Green
Transition”, APRI
Scharwatt, Claire Penicaud and Elisa Minischetti, 2014, “Reaching Half of the Market: Women and
Mobile Money”, GSMA
Sustainable Energy for All, 2023, “Africa Renewable Energy Manufacturing Opportunity & Advancement”
Takudzwa Pasara, Michael and Steven Henry Dunga, “Who wins and who loses under AfCFTA? A
simulation analysis across ECOWAS countries” in International Journal of Economics and Finance
Studies, Vol.12, No.2, 2020
Trade Map, 2022, “International Trade Statistics”
UNDP, 2023, “Can Ethiopia Become a Manufacturing Powerhouse?” (Working Paper)
United States Department of Agriculture, 2024, “Foreign Agriculture Service Statistics”
World Bank, 2024, “World Development Indicators”
World Bank, 2024, “Global Solar Atlas”
67

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February 2024

AfCFTA, harnessing the power of Intra-Africa trade

CFC Africa Insights

5 Chapter One : AfCFTA Context 10

6 Chapter Two : Macroeconomic Impacts 19

7 Chapter Three : International Comparisons 27

7.1 Chapter Four : Sector Case Studies 36

7.2 4.1. Automotive Sector (Morocco) 37

7.3 4.2. Agro-processing (Côte d’Ivoire) 43

7.4 4.3. Clothing and Apparel (East Africa) 50

8 4.4. Energy Transition (Various Economies) 57

9 Conclusion & Takeaways 64

This report serves as a comprehensive examination of the opportunities and challenges

I wish you a pleasant read.

Source: World Bank (Change by 2035)

Increase in Intra-Africa Trade by 2035, USDbn

Source: World Bank (Rise in exports compared to non-AfCFTA baseline)

The deal is, admittedly, still a work in progress. Indeed, while

Selected Free Trade Areas

State Parties Population GDP (trillion)

European Union (EU) 27 447 million USD 17.8

Gulf Co-operation Council (GCC) 6 65 million USD 2.3

Regional Comprehensive Economic Partnership (RCEP) 15 2.2 billion USD 29.7

United States-Mexico-Canada Agreement 3 500 million USD 26

Source: BMI Research (*Not all have ratified)

1. THE STATE OF ECONOMIC INTEGRATION IN AFRICA

Figure 1.1 Exports to Own Continent, % of total exports

Source: Trade Map (2022)

Figure 1.2 Trade-Weighted Tariff Faced

Source: World Bank

Figure 1.3 Africa GDP, USDbn

Source: BMI Forecast

2. THE AFRICAN CONTINENTAL FREE TRADE AREA PROCESS

Navigating a Turbulent Context: AfCFTA and Geopolitics

Figure 1.4 Firms Reporting Access to Finance

Source: IMF Financial Access Survey

AfCFTA – Tariff Removal Schedule

General Goods 90 2020-25 2020-2030

Excluded Goods 3 10 No Liberalisation No Liberalisation

Source: World Bank, UNCTAD, BMI Research

Guided Trade Initiative: A Preview of AfCFTA Trade?

3. KEY AFRICAN CONTINENTAL FREE TRADE AREA INSTITUTIONS

The AfCFTA process has been driven by national

On a day-to-day basis, AfCFTA will be managed

• Common Market for Eastern and Southern Africa (COMESA)

This has three key implications:

1. AGGREGATE ECONOMIC IMPACTS

Figure 2.1 Effect on Africa’s GDP by 2035, % increase

Source: AfDB (2019), World Bank (2020), Misc.

Additional Increase in Real Incomes by 2035, % change compared to non-AfCFTA baseline

Source: World Bank (Change by 2035)

Figure 2.2 Pre-AfCFTA Trade-Weighted Tariff on African Imports, %

Source: World Bank

3. KEY ECONOMIC EFFECTS

While AfCFTA will have a variety of impacts, we

First, AfCFTA will reduce import costs and

Figure 2.3 African Exports by Category, % of total

Source: World Bank

Figure 2.4 Increase in Intra-Africa Trade by 2035, USDbn

Source: World Bank, (Rise in exports compared to non-AfCFTA baseline)

Figure 2.6 Customs Revenue, % of Total

Source: World Bank (Latest figures available)

NEGATIVE ECONOMIC IMPACTS

Figure 2.7 Projected Decline in Customs Revenue